DCIT 10(1), MUMBAI V. KODAK INDIA P. LTD, MUMBAI

ITA 1533/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1752 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 15-03-2016
• Assessment Year: 1997-1998
• Appeal Filed On: 05-03-2014
• Court: TRIBUNAL
• Department Lawyers: A RAMACHANDRAN
• Keywords: Depreciation; Revised return; Bonafide mistake; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI RAVISH SOOD , JM ./ ITA NO. 1533 / MUM/20 1 4 ( / ASSESSMENT YEAR : 1997 - 98 ) DCIT - 10(1) , MUMBAI VS. M/S. KODAK INDIA PVT. LTD., 6 TH FLOOR, B - WING, VINAY BHAVYA COMPLEX, 159A, CST ROAD, KALINA, SANTACRUZ, MUMBAI - 400098 PAN/GIR NO. AA ACK 2172 J APPELLANT ) .. RESPONDENT ) REVENUE BY SHRI A. RAMACHANDRAN ASSESSEE BY SHRI JITENDRA JAIN DATE OF HEARING 2 5 / 10 /2016 DATE OF PRONOUNCEME NT 05 / 12 / 2016 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) FOR THE ASSESSMENT YEAR 1997 - 1998, IN THE MATTER OF PENALTY IMPOSED U/S. 271(1)(C) OF THE IT ACT. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD P ERUSED. 3. THE FACTS OF THE CASE AR E THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF PHOTOGRAPHIC MATERIALS. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD PURCHASED PLANT AND MACHINERY IN THE FIRST HALF OF THE PREVIOUS YEAR WHICH WAS CAPITALIZED IN THE FIRST HALF OF THE YEAR BUT DEPRECIATION WAS CLAIMED ITA NO.1533/MUM/2014 KODAK INDIA PVT. LTD., 2 FOR THE FULL YEAR OVERLOOKING THE FACT THAT IT WAS PUT TO USE ONLY IN MARCH, 1997. THE A.O. NOTICED THE MISTAKE THEN THE ASSESSEE HAD WITHDRAWN THE CLAIM. SINCE ASSESSEE HAD WITHDRAWN THE CLAIM , NO APPEAL WAS FILED ON THE ABOVE ISSUE. HOWEVER, THE AO LEVIED PENALTY U/S.271(1)(C) WITH RESPECT TO DISALLOWANCE OF PART OF DEPRECIATION. 4. BY THE IMPUGNED ORDER CIT(A) DELETED THE PENALTY AFTER OBSERVING AS UNDER: - I HAVE CONSIDER ED THE FACTS AND CIRCUMSTANCES OF THE CASE. THE A.O. HAD DISALLOWED' DEPRECIATION CLAIMED BY THE APPELLANT FOR THE FULL YEAR THOUGH THE PLANT WAS PUT TO USE ONLY IN ME IATER PART OF THE YEAR FOR RS.55,67,956/ - AND DISALLOWED RS.6,76 - ,052/ - FOR NON PRODUCTIO N OF BILLS OUT OF WHICH ONLY CIT(A) UPHELD RS.2,54,100/ - . ON THE ABOVE TWO ISSUES A.O. HAD LEVIED PENALTY. WITH RESPECT TO ISSUE OF DEPRECIATION CLAIMED BY THE APPELLANT FOR FULL YEAR THOUGH PLANT & MACHINERY WAS PUT TO USE IN THE FAG END OF THE YEAR. TH E A.O. DISALLOWED DEPRECIATION DURING ASSESSMENT PROCEEDINGS BUT THE APPELLANT HAD NOT APPEALED BEFORE THE CIT(A). DURING PENALTY PROCEEDINGS APPELLANT HAD CLEARLY STATED THAT IT IS INADVERTENT MISTAKE HENCE, PENALTY SHOULD NOT BE LEVIED. THE A.O. DISAGREE ING WITH THE SUBMISSIONS OF THE APPELLANT L EVIED PENALTY U/S.271(1)(C). HON 'BLE SUPREME COURT IN THE CASE OF PRICE WATERHOUSE COOPERS PVT. LTD. VS. CIT 348 ITR 306 (SC) HELD THAT WHEN THERE IS A BONAFIDE AND INADVERTENT MISTAKE PENALTY SHOULD NOT BE LEVIED . FURTHER IN CIT VS. SOMANY EVERGREE KNITS LTD. 352 ITR 592 (BORN) WHEREIN IT IS HELD AS UNDER: 'THE TRIBUNAL HELD THAT THE EXCESS DEPRECIATION CLAIMED FOR THE ASSESSMENT YEAR 2003 - 04 WAS ON ACCOUNT OF BONAFIDE AND INADVERTENT MISTAKE ON THE PART OF THE ASSESSEE. IN ANY CASE, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE REALIZED ITS MISTAKE AND POINTED IT O UT. THE TRIBUNAL HELD THAT THE MISTAKE SHOULD NOT BE VISITED WITH PENALTY UNDER SECTION 271 (L)(C) OF THE INCOME - TAX ACT, 1961. ON A PPEAL: HELD, DISMISSING THE APPEAL, THAT THE GRIEVANCE OF THE REVENUE WAS THAT THE MISTAKE OUGHT TO HAVE BEEN RECTIFIED BY FILING A ITA NO.1533/MUM/2014 KODAK INDIA PVT. LTD., 3 REVISED RETURN OF INCOME. THE TRIBUNAL HELD THAT THE TIME TO FILE A REVISED RETURN HAD EXPIRED. THERE WAS NO DISPUTE THAT IT WAS A BONAFIDE MISTAKE ON THE PART OF THE ASSESSEE. THEREFORE, THE IMPOSITION OF PENALTY WAS NOT WARRANTED. DURING THE ASSESSMENT YEAR 2003 - 04, THE ASSESSEE SOLD ITS GARMENT ASSETS AND CLAIMED A LOSS OF RS.21.68 LAKHS THEREON AS A REVENUE EXPENDITURE IN ITS RETURN, IN THE COURSE OF ASSESSMENT PROCEEDINGS, IT REALIZED ITS MISTAKE AND WITHDREW THE LOSS. THE ASSESSING OFFICER ACCEPTED THE WITHDRAWAL AND COMPLETED THE ASSESSMENT BUT IMPOSED PENALTY UNDER SECTION 271 (1)(C). THE COMMISSIONER(APPEALS) UPHELD THE O RDER OF THE ASSESSING OFFICER, THE TRIBUNAL HELD THAT THE CLAIM FOR DEDUCTION MADE BY THE ASSESSEE WAS ON ACCOUNT OF A BONA FIDE MISTAKE AND IN SUCH CIRCUMSTANCES, THE LEVYING OF PENALTY WAS NOT JUSTIFIED. ON APPEAL: HELD, DISMISSING THE APPEAL, THAT THE GRIEVANCE OF THE REVENUE WAS THAT PENALTY WAS JUSTIFIED IN VIEW OF THE FACT THAT THE ASSESSEE HAD NOT FILED A REVISED RETURN. HOWEVER, THE TRIBUNAL NOTED THAT THE TIME TO FILE A REVISED RETURN HAD EXPIRED. THERE WAS NO DISPUTE THAT IT WAS A BONA FIDE MIST AKE ON THE PART OF THE ASSESSEE. THUS THE IMPOSITION OF PENALTY UPON THE ASSESSEE WAS NOT WARRANTED. ' IN THE ABOVE TWO CASES IT IS HELD THAT IF APPELLANT IN HIS EXPLANATION STATES THAT THERE IS INADVERTENT MISTAKE THEN PENALTY CANNOT BE LEVIED U / S.271(1 )(C). FURTHER IN OUR CASE ALSO APPELLANT: WAS INSISTING FROM THE BEGINNING THAT IT IS INADVERTENT MISTAKE, HENCE, PENALTY CANNOT BE LEVIED. FURTHER IN SIMILAR CASE OF OSCAR FREIGHT P. LTD. VS. ITO (ITA NO.1707 /MUM/ 2010 WHERE THE FACTS ARE IDENTICAL TO OUR CASE, THE HON'BLE ITAT HAS HELD AS UNDER: (6. WE. HAVE CONSIDERED THE ISSUE. AS FAR AS THE FACTS ARE CONCERNED THERE IS NO DOUBT THAT ALL THE THREE TRUCKS WERE PURCHASED BEFORE 30 TH SEPTEMBER, I.E. FROM 27TH AUGUST TO 9TH SEPTEMBER, 2003. IT IS ALSO NOTI CED THAT THE ASSESSEE HAS SPENT AN AMOUNT OF RS. 7, 70, 731/ - FOR BUILDING BODIES OF THE ABOVE TRUCKS. EVEN THOUGH THE ACTUAL COMPLETION OF THE WORK WAS NOT ON RECORD BUT THE SCHEDULE IN COMPANY'S ACCOUNT INDICATES THAT THESE WERE REPORTED TO HAVE BEEN CO MPLETED BEFORE 3 0 TH SEPTEMBER, 2003 AND ACCORDINGLY SHOWN IN THE SCHEDULE AS SUCH. AS CAN BE SEEN FROM OTHER DETAILS, THE TRUCKS WERE REGISTERED WITH THE AUTHORITIES ON 14TH OCTOBER 2003. THEREFORE, IT CAN BE STATED THAT THE TRUCKS WERE READY FOR USE BEFO RE THAT DATE. IT CAN ALSO BE CONSIDERED THAT THE RTO AUTHORITIES WILL TAKE SOME TIME IN REGISTERING THE VEHICLES, ITA NO.1533/MUM/2014 KODAK INDIA PVT. LTD., 4 WHICH WAS ULTIMATELY DONE ON 14TH OCTOBER. THEREFORE, THE TRUCKS COULD HAVE BEEN READY ANY TIME BEFORE 14TH OCTOBER 2003. T HE FIRST STEP OF IN COME DATE 31 ST OCTOBER DOES NOT PROVE THAT THE FIRST TRIP WAS MADE ONLY ON THAT DATE. ONCE THEY ARE READY FOR USE AND WERE REGISTERED, IT CANNOT BE STATED THAT THE TRUCKS WERE NOT PUT TO USE FOR MORE THAN 180 DAYS DURING THE YEAR. HOWEVER, SINCE THESE TRUC KS WERE PURCHASED IN THE MONTHS OF AUGUST AND SEPTEMBER AND WERE REGISTERED AROUND 14TH OCTOBER, ASSESSEE'S EXPLANATION THAT THEY WERE UNDER BONA FIDE MISTAKE IN CLAIMING DEPRECIATION AT FULL CANNOT BE REJECTED. MOREOVER, THE ACCOUNT SCHEDULE ((A' ALSO IND ICATES' THAT PURCHASE TO THE EXTENT OF RS.21, 71,321/ - WERE MADE IN AUGUST 2003 AND RS. 7,35,000/ - WAS MADE IN SEPTEMBER, 2003 THE FACTS OF WHICH WERE NOT DISPUTED. JUST BECAUSE THERE IS NO EVIDENCE OF PUT TO USE FOR MORE THAN 180 DAYS DURING THE YEAR, T HE A. O . RESTRICTED THE DISALLOWANCE TO 50% OF THE ALLOWABLE DEPRECIATION. WE ARE OF THE OPINION THAT JUST BECAUSE THE CLAIM OF DEPRECIATION WAS NOT ALLOWED IN FULL, THE FACTS DOES NOT LEAD FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) ON THE REASON OF CONCEA LMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. MAKING INCORRECT CLAIM DOES NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS UNLESS WITH MALA FIDE INTENTION AS HELD BY THE HON'BLE P&L HARYANA HIGH COURT IN THE CASE OF C IT VS. RUBBER UDYOG VIKAS PVT. LTD. 3351TR 558. ON SIMILAR FACTS THE L T AT CHAN DIGARH BENCH IN THE CASE OF DCLT VS. SHAHBAD CO - OPERATIVE SUGAR MILLS 129 TTJ (CHD) 92 CAME TO THE CONCLUSION. MAT THOUGH ASSETS WERE ADDED AFTER 3CJTH SEPTEMBER AND ASSESSEE CLAIMED DEPRECIATION FOR THE FULL YEAR, THERE WAS A BONAFIDE MISTAKE WHILE FILING THE RETURN. WHICH DID NOT INVOLVE ANY CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS AND DOES NOT ATTRACT PENALTY. THE HO N 'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. BHRAHMAPUTRA CONSORT IUM LTD. 2011 - TIOL - 470 - HC-DEL - IT ALSO HELD THAT WHEN THE ASSESSEE ACCEPTS THAT EXCESS DEPRECIATION WAS CLAIMED INADVERTENTLY AND THE SAME BEING DISALLOWED BY THE A. O. PENALTY UNDER SECTION 271 (1)(C) IS NOT WARRANTED. 7. HON'BLE SUPREME COURT IN THE CASE OF ELL' VS. RELIANCE PETROCHEMICALS LTD. 322 TI'R 158 ALSO HELD THAT A MERE MAKING OF CLAIM, WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF, WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS. IN VIEW OF THESE JUDICIAL PRINCIPLES, WE ARE OF THE OPINION THAT MAKING HIGHER CLAIM OF DEPRECIATION ON A BONA FIDE MISTAKE CANNOT BE CONSIDERED AS FURNISHING OF INACCURATE PARTICULARS OR CONC EALMENT OF INCOME SO AS TO ATTRACT PENALTY. ITA NO.1533/MUM/2014 KODAK INDIA PVT. LTD., 5 8. THE LEARNED D.R. IN HIS ARGUMENT RELIED ON THE PRINCIPLES ESTABLISHED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF C IT VS. ZOOM COMMUNICATION P. LTD. 327 LT R 510. THE FACTS IN THE CASE INDICATE THAT THERE THE ASSESSEE CLAIMED CERTAIN CAPITAL EXPENDITURE AS REVENUE EXPENDITURE BY WRITING OFF IT IN THE BOOKS OF AC COUNT. ON THE SET OF FACTS THE HON'BLE DELHI HIGH COURT HELD THAT THE CLAIM BEING MALA FIDE CLAIM PENALTY WAS ATTRACTED. HOWEVER, IN THE PRESENT CAS E WE DO NOT SEE ANY MALAFIDE INTENTION OF THE ASSESSEE IN CLAIMING DEPRECIATION AT FULL(40%) ON THE ASSETS WHEREAS AS PER THE PROVISO THE CLAIM IS TO BE RESTRICTED TO 50% OF THE ALLOWABLE AMOUNT, IF THE ASSETS ARE NOT PUT TO USE FOR MORE THAN 180 DAYS IN A N YEAR. EVEN THOUGH THE AO MADE A STRICT CUT OFF DATE OF 30 TH SEPTEMBER, 2003 TECHNICALLY SPEAKING THE 180 DAYS RESTRICTION CAN START ON 3RD OR 4TH OCTOBER 2003 ONWARDS. AS POINTED OUT EARLIER THE TRUCKS WERE REGISTERED BY 14TH OCTOBER, 2003. THIS INDICAT ES THAT THE TRUCKS WERE READY FOR USE AROUND THE FIRST WEE K OF OCTOBER, 2P03. IT CANNOT B E STATED THAT ASSESSEE MALAFIDELY CLAIMED MORE DEPRECIATION. IT CAN BE A BONA FIDE MISTAKE IN CLAIMING FULL DEPRECIATION ON THE REASON THAT THE TRUCKS WERE PURCHASED BE FORE 9TH SEPTEMBER 2003. THE DATE OF BODY BUILDING WERE SHOWN BY THE CL T '(A) AS 1 0 TH NOVEMBER, 2003. THIS ITSELF DOES NOT ESTABLISH THAT THE BODY BUILDING WAS DONE LATER AS THE REGISTRATION OF THE TRUCKS WAS DONE ON 14TH OCTOBER 2003 ITSELF. THERE CAN BE NO REGISTRATION WITHOUT BODY BEING BUILT. SINCE WE ARE OF THE OPINION THAT THERE IS A BONAFIDE MISTAKE IN CLAIMING HIGHER DEPRECIATION, RESPECTFULLY FOLLOWING THE PRINCIPLES ESTABLISHED AS STATED ABOVE, WE HAVE NO HESITATION IN CANCELLING PENALTY LEVIED UN DER SECTION 271 (L)(C). THESE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. ' APPLYING THE RATIO OF THE BOMBAY TRIBUNAL, DECISION WHERE THE FACTS ARE SIMILAR TO OUR CASE HAVE HELD THAT FOR INADVERTENT MISTAKE PENALTY CANNOT BE LEVIED. HENCE; FOLLOWING ALL THE ABOVE DECISION, PENALTY LEVIED IS CANCELLED. 5. AGAINST THE ABOVE ORDER OF CIT(A) REVENUE IS IN FURTHER APPEAL BEFORE US. 6. LEARNED DR RELIED ON THE DECISION OF HONBLE SUPREME COURT IN CASE OF ZOOM COMMUNICATION PVT. LTD., AND MAK DATA (P) LTD., I N ITA NO.1533/MUM/2014 KODAK INDIA PVT. LTD., 6 SUPPORT OF THE PROPOSITION THAT MERE OFFERING OF INCOME WILL NOT EXONERATE THE ASSESSEE FROM PENALTY PROCEEDINGS. 7. ON THE OTHER HAND LEARNED AR RELIED ON THE FOLLOWING DECISIONS: - 1 PRICE WATERHOUSE COOPERS PVT. LTD. V. CIT (348 ITR 306)(SC) 2 CIT V. SOMANY EVERGREE KNITS LTD. (352 ITR 592)(BOM.) 3 CIT V. BRAMHAPUTRA CONSORTIUM LTD. (2011 - TIOL - 470 - HC - DEL - IT) 4 CIT V. BENNETT COLEMAN & CO. LTD. (259 CTR (BORN.) 383) 5 CIT V. GLOW TECH STEELS P. LT D. (280 ITR 133)(GUJ.) 6 CIT V. SOCIETEX (24 TAXMANN.COM 309) (DELHI) 7 DCIT V. SHAHABAD CO - OP. SUGAR MILLS (129 TT] 92) (CHANDIGARH TRIB.) 8 DYNATRON PVT. LTD. V. DCIT (36 CCH 0110) (MUM. TRIB.) 9 RABO INDI A FINANCE LTD. V. DCIT (30 CCH 0417) (MUM. TRIB.) 10 OSCAR FREIGHT P. LT D. V. ITO (ITA NO. 1707/MUM.L2010) (MUM. TRIB.) 8. WE HAVE CONSIDERED RIVAL CONTENTIONS AND DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS REFERRED BY LOWER AUTHOR ITIES IN THEIR RESPECTIVE ORDERS AND CITED BY LEARNED AR AND DR DURING THE COURSE OF HEARING BEFORE US IN THE CONTEXT OF ACTUAL FACTS OF THE INSTANT CASE. FROM THE RECORD WE FOUND THAT PENALTY HAS BEEN LEVIED WITH RESPECT TO THE INADVERTENT CLAIM OF DEPREC IATION WHICH WAS WITHDRAWN WHEN POINTED OUT BY THE AO. THE ISSUE UNDER CONSIDERATION IS COVERED BY THE DECISION OF HONBLE SUPREME COURT IN CASE OF PRICE WATERHOUSE COOPERS PVT. LTD., (348 ITR 306) . W E FOUND THAT PLANT AND MACHINERY WAS PURCHASED MORE THAN SIX MONTHS PRIOR TO THE CLOSE OF THE ACCOUNTING YEAR, HOWEVER, IT WAS PUT TO USE IN THE FAG END OF THE ITA NO.1533/MUM/2014 KODAK INDIA PVT. LTD., 7 YEAR. IT WAS FOUND TO BE AN INADVERTENT MISTAKE, HENCE PENALTY CANNOT BE LEVIED. 9. THE DETAILED FINDING GIVEN BY CIT(A) BY RELYING ON VARIOUS JUDICIAL PRONOUNCEMENTS ARE AS PER MATERIAL ON RECORD. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS RECORDED BY THE CIT(A) RESULTING INTO DELETION OF PENALTY. 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. O RDER PRONOUNCED IN THE OPE N COURT ON THIS 05 / 12 /2016 SD/ - ( RAVISH SOOD ) SD/ - ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER M UMBAI ; DATED 05 / 12 /201 6 KARUNA , SR. PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//